By Elton Gomes
In the FDI (foreign direct investment) Confidence Index 2018 of consultancy firm AT Kearney, India has slipped by three spots and now occupies the eleventh spot in the list. The report said that for the first time since 2015, India was not in the top 10 spots. Besides India, China (fifth) and Singapore (twelfth) also have dropped spots. However, Australia rose to the eight spot, while New Zealand occupied the sixteenth spot on the list.
India ranked eighth in 2017, and it occupied the ninth spot in 2016. The report added that certain policies might have deterred investors, at least in the short term. The report said that “The 2017 nationwide goods and services tax (GST), for example, has faced implementation challenges, and the 2016 demonetisation initiative disrupted business activity and weighed on economic growth.”
Notable political risks
The report highlighted several reforms – such as eliminating the Foreign Investment Promotion Board and liberalising FDI limits in key sectors – that have helped India in maintaining its high rankings in terms of FDI attractiveness.
Moreover, the report added that investors based in the US and in the industry sector rank India the highest in terms of their intention to invest there. The report said that such confidence could “be a result of the governments Make in India initiative, which aims to boost investment in India’s manufacturing sector as well as its pursuit of closer ties with the US.”
The report mentioned, “Notable reforms include the elimination of the Foreign Investment Promotion Board, a government agency responsible for reviewing all potential foreign investment, and the liberalisation of foreign investment thresholds for the retail, aviation, and biomedical industries.”
The report further stated that potential investors might have exercised caution as China abolished its presidential term limits and India holds general elections in 2019. The report said, “The sheer size of the Chinese and Indian markets, however, will continue to be a draw for investors, and they remain the highest-ranking emerging markets on the index.”
The Asia Pacific region
The report said that investor preferences for the Asia Pacific region seem to have “declined slightly“, as only seven Asian countries have appeared on this year’s index. “The flip side is that this year marks an all-time low for the share of emerging markets on the Index. Just four emerging markets appear among the top 25 countries for FDI intentions: China, India, Mexico, and Brazil. This suggests that confidence in investing in specific emerging markets has declined,” the report said.
Elton Gomes is a staff writer at Qrius
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